How Do I Calculate the Cost of Sales?

Answer

There are two common methods of calculating cost of sales: direct costing and absorption costing. Using the direct costing method, add the cost of material and labour involved in preparing your item for sale. In absorption costing, add the material and labour plus overhead expenses, such as lease, utilities and office expenses.
3 Additional Answers
Ask.com Answer for: how do i calculate the cost of sales
How to Calculate the Cost of Sales
The cost of sales, also referred to as the cost of goods sold, is a measure of how much it costs a company to sell its products. The cost of sales is also a necessary step when a business is trying to determine the amount of gross profit made in a given... More »
Difficulty: Easy
Source: www.ehow.com
You can calculate the cost of sales using the direct costing method for management reports. In direct costing, add the material and labour involved in preparing your item for sale then figure absorption costing by adding the material and labour plus overhead expenses. This will give you the cost of sales. It’s important to remember that total sales minus cost of sales equals gross profit.
To calculate the cost of sales, you will add the beginning of inventory and all the inventory purchases during the year and then subtract the end of inventory. The beginning of inventory together with the amount of inventory that is purchased equals to the amount of inventory that could have been sold. It is then assumed that the inventory at the end of the period was not sold, hence subtracting the ending inventory balance.
Explore this Topic
To calculate sales turnover one can add the cost of sales to the gross profit of a business. Turnover is the total value of the sales made within a financial year ...
To calculate sales commission you must first know what the percentage of commission that is owed. You would then multiply the sales by that percent. ...
Calculating return on sales (ROS) can be done using a simple formula. Divide the operating profit by total sales times 100 to calculate ROS. ROS can vary a great ...
About -  Privacy -  Careers -  Ask Blog -  Mobile -  Help -  Feedback  -  Sitemap  © 2014 Ask.com